Novelty detection is an evolutionarily significant and ancient function as well as a relatively stable function whose early life status marks for long-term developmental outcomes and predicts a range of adult functions. While various brain regions have been shown to respond to environmental novelty, how different brain regions coordinate in novelty related information processing remains under-explored. Here using a combination of high-density EEG, second order blind identification (SOBI), and a standard visual oddball task, we test, in humans, a two-stage novelty processing hypothesis which states that two distinct stages of novelty processing exist, one involves early-occurring domain-specific neural activity in the sensory processing areas of the brain and the other involves later-occurring domain-general neural activity involving brain regions beyond the sensory cortices. We found that: (1) a significant Novelty effect (oddball effects) not only in the SOBI-recovered Late component (P300 component) but also in the Early component (N150 visual) offering first EEG evidence for oddball effect in the sensory domain; (2) a significant Stage (Early vs Late) by Frequency (delta, theta, alpha, beta, and gamma) interaction effect indicating two functionally dissociable mechanisms underlying novelty detection; (3) a significantly shorter latency in odd-ball related theta power increase in the Early visual than in the late P300 component. These results not only offer support for the two-stage novelty processing theory but also provide new evidence for an early involvement of theta power increase in the novelty processing.